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Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2011
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
December 2011
David Alan Schams
OS/2009018293201/December 2011
Schams accepted appointment as an alternative agent attorney-in-fact over a customer account, without his member firm’s express written consent. 
Schams was to receive approximately $90,000 from the customers’ estate. Schams accepted two $20,000 interest-free loans on the anticipated inheritance, without signing a promissory note evidencing the loan, contrary to the firm’s compliance policies that prohibited registered representatives from exercising or maintaining discretionary authority or power of attorney over customer accounts and borrowing money, accepting loans, issuing or transacting promissory notes or other similar forms of debt for customers without the express written consent of the firm’s compliance department. 

Schams made material misstatements to his firm in a compliance questionnaire regarding borrowing money or accepting a loan from a client, holding any securities, stock powers, money or property belonging to a client, accepting client checks made payable to him, or endorsed to him personally or in the name of an entity, and managing or handling, in any way, the affairs of any client account on a discretionary basis. 
David Alan Schams: Barred
Tags:  Borrowed    Estate        Annual Compliance Certification     |    In: Cases of Note : FINRA
Howard Sang Lee
AWC/2009019154301/December 2011
Lee borrowed $20,000 from his customer and repaid the loan in full, plus interest. During the time of the loan transaction, the firm’s procedures specifically prohibited registered representatives from borrowing money from customers. 
Lee’s conduct was aggravated by the fact that he failed to disclose the loan when completing the firm’s annual compliance inspection forms for two years, when he answered “yes” to the question, “Do you understand and comply with the rule that you cannot loan money to, or borrow money from your clients?”  
Howard Sang Lee: Fined $5,000; Suspended 3 months
John Maraldi Grover III
AWC/2010022180101/December 2011
Grover borrowed $67,326.68 from a customer contrary to his member firm’s prohibition of registered persons from borrowing money from customers. Grover signed and dated a form acknowledging that the firm prohibited its representatives from borrowing money or securities from a client. In light of the fact that the customer was not a member of Grover’s immediate family and was not in the business of lending money, his Firm did not approve the loan. 
John Maraldi Grover III : Fined $5,000; Ordered to pay $67,326.68 plus interest as restitution to a customer; Suspended 90 days.
Tags:  Borrowed     |    In: Cases of Note : FINRA
Ronald John Garabed Sr.
AWC/2010024175501/December 2011
Garabed borrowed $15,000 from his customer at his firm contrary to his firm’s procedures, which did not permit loans between registered representatives and their customers under any circumstances. Garabed agreed to  repay the customer the principal loan amount plus an additional $5,000, he ultimately repaid a total of approximately $15,200. Garabed denied on a compliance questionnaire that he had ever solicited or accepted a loan from a client. 
Garabed willfully failed to update his Form U4 to disclose material information. 
Ronald John Garabed Sr.: Fined $10,000; Suspended 6 months
Steven Gayne Winters (Principal)
OS/2009019911701/December 2011
Winters willfully failed to timely amend his Form U4 to disclose a material fact and he borrowed $20,000 from a customer contrary to his member firm’s written procedures that expressly prohibited firm employees from borrowing money from, or lending money to, firm customers. Winters neither sought nor obtained approval from the firm before receiving the loan from the customer, and his arrangement with the customer did not satisfy any of the conditions set forth in NASD Rule 2370(a)(2)(A)-(E). To date, a $5,500 balance remains unpaid by Winters on the principal of the loan. 
Steven Gayne Winters (Principal): FIned $10,000; Ordered to pay $5,500 restitution to a customer; Suspended 8 months
Tags:  Borrowed     |    In: Cases of Note : FINRA
William Alexis Cronin Jr.(Principal)
AWC/2011025885801/December 2011
Cronin participated in private securities transactions without prior written notice to, and prior written approval from, his member firm. The findings stated that Cronin sold approximately $1,712,500 in notes and debentures to investors, most of whom were his firm’s customers at the time. The notes and debentures, which were securities, were sold through private placements. Cronin received approximately $171,000 in commissions from these investments. 

Cronin borrowed $10,000 from one of his customers at his firm. Cronin executed a promissory note stating that the loan was to be paid in full by a certain date, but failed to repay the loan according to the terms of the note. Cronin eventually repaid the loan with interest, but only after the customer filed an action against him. 

Cronin borrowed $5,000 from another customer through a loan that was not reduced to writing, and had no repayment terms; Cronin repaid the loan. 

Cronin did not disclose either of the loans to his firm, which prohibited loans from customers without prior firm approval. 
William Alexis Cronin Jr.(Principal): Fined $181,000 (included $171,000 disgorgement of commissions); Suspended 2 years
Tags:  Private Placement    Promissory Notes    Borrowed     |    In: Cases of Note : FINRA
Enforcement Actions
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It's All Over Now: My 42-year Wall Street Journey by Bill Singer, Esq.
January 30, 2024
Before my second career as a lawyer, I was the third generation of my family in the wine and liquor industry. In 1981, I started law school; and in 1982, I was hired as a law student in Smith Barney, Harris & Upham's Legal Department. After I graduated law school, I was a regulatory lawyer with the American Stock Exchange and then with the NASD (now... Read On
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